What Is the FRM Exam?

The Financial Risk Manager (FRM) exam is a two-part certification administered by the Global Association of Risk Professionals (GARP). It tests practical competence in market risk, credit risk, operational risk, liquidity and treasury risk, and investment risk management. Pass rates hover around 45 to 50 percent for both parts (GARP), and the credential is widely recognized in bank risk, asset management, and regulatory roles.

I know risk professionals at banks and insurers who hold the FRM. The pattern I see: candidates pursue the FRM because their employer asks for it, or because they want to move from quantitative finance into a risk-management role specifically. Unlike the CFA, which is broad investment analysis, the FRM is laser-focused on risk.

Here's everything you need to know about the FRM in 2026.

Two Parts, Two Sittings

The FRM is structured as two computer-based exams, taken in sequence:

FRM Part I

  • Questions: 100 multiple-choice
  • Duration: 4 hours
  • Pass rate: approximately 45 to 50 percent (GARP)
  • Topics: Foundations of Risk Management, Quantitative Analysis, Financial Markets and Products, Valuation and Risk Models

FRM Part II

  • Questions: 80 multiple-choice
  • Duration: 4 hours
  • Pass rate: approximately 45 to 50 percent (GARP)
  • Topics: Market Risk Measurement and Management, Credit Risk Measurement and Management, Operational Risk and Resilience, Liquidity and Treasury Risk Measurement and Management, Risk Management and Investment Management, Current Issues in Financial Markets

Both parts are graded as quartile-banded results (1 to 4), with quartile 1 being the strongest. GARP doesn't publish a numerical passing score, but quartiles 1 and 2 have historically been considered passing.

FreeFellow offers free FRM Part I practice (997 questions) and free FRM Part II practice (511 questions), covering all GARP topic areas.

Key Concept

Both parts must be passed to earn the FRM designation. Most candidates take Part I and Part II in sequence, with 4 to 6 months of study between sittings.

What Each Part Tests

Part I: Foundations

Part I is the technical foundation. It tests whether you understand the math, the products, and the basic risk frameworks. Specifically:

  • Foundations of Risk Management (~20%): ERM frameworks, governance, ethics, financial disasters as case studies
  • Quantitative Analysis (~20%): probability distributions, regression, hypothesis testing, time series, simulation methods
  • Financial Markets and Products (~30%): futures, forwards, swaps, options, fixed income, mortgage-backed securities
  • Valuation and Risk Models (~30%): VaR, expected shortfall, stress testing, option pricing models, fixed-income risk

If you've passed CFA Level I or have an MBA with a risk focus, Part I will feel familiar. If you're coming from a software or operations background without strong quantitative training, plan extra time on Quantitative Analysis.

The Foundations module includes case studies of financial disasters: Long-Term Capital Management, Barings Bank, Metallgesellschaft, the 2008 financial crisis, the LIBOR scandal. GARP uses these as anchors for risk-governance lessons. Read them at the level of cause and effect, not at the level of memorizing dates.

Part II: Application

Part II is where the credential earns its reputation. It assumes you've passed Part I and dives into how risk is actually managed in practice:

  • Market Risk (~20%): advanced VaR methodologies, expected shortfall, backtesting, copulas, extreme value theory
  • Credit Risk (~20%): counterparty credit risk, CVA/DVA/FVA, default modeling, structured products
  • Operational Risk (~20%): Basel-mandated approaches, scenario analysis, cyber risk, model risk
  • Liquidity and Treasury Risk (~15%): funding liquidity, market liquidity, balance sheet management, regulatory liquidity ratios
  • Risk Management and Investment Management (~15%): portfolio risk, risk-adjusted performance, hedge fund risk
  • Current Issues (~10%): rotating reading list of contemporary topics published by GARP each cycle

Part II is more conceptual and less formula-heavy than Part I. The questions ask you to apply frameworks to real-world scenarios.

The Current Issues module is unique to the FRM. GARP publishes a rotating reading list each cycle covering active topics: climate risk, AI in risk modeling, cyber resilience, central bank digital currencies, post-LIBOR transition. Don't ignore it. Current Issues is roughly 10 percent of Part II, and the questions are surface-level if you've actually read the assigned papers.

The Two-Year Experience Requirement

Passing both parts is necessary but not sufficient for the FRM designation. After passing Part II, you must demonstrate 2 years of full-time professional experience in a role substantively related to financial risk management (GARP). Acceptable roles include:

  • Bank risk management (market, credit, operational)
  • Asset management portfolio risk
  • Insurance risk and capital
  • Regulatory roles at central banks or regulators
  • Risk consulting and audit

GARP reviews each application individually. The experience does not have to be after passing Part II. Pre-exam experience counts. You submit the application within 5 years of passing Part II to certify the experience.

Note

The 2-year requirement is broader than candidates expect. Many roles in audit, regulatory compliance, and corporate treasury qualify. Don't assume you don't have qualifying experience until you've checked GARP's published criteria.

Format and Logistics

Computer-based testing. Both parts are administered at Pearson VUE testing centers globally. GARP offers FRM exams multiple times per year, with the specific dates published on garp.org. Most candidates sit at least once per calendar year.

No partial credit. Multiple-choice format with single correct answers. There's no penalty for guessing, so answer every question.

4-hour sessions. Both parts are 4 hours of straight testing with optional bathroom breaks. Stamina is real. Take at least 2 to 3 full timed mocks before your sitting.

Calculator. GARP allows the TI BA II Plus, TI BA II Plus Professional, HP 12C, and HP 12C Platinum. No other calculators. Practice every numerical question with your approved calculator.

Identification. GARP requires a valid government-issued photo ID at the testing center, with the name on the ID matching the name on your GARP registration exactly. Candidates have been turned away for name mismatches as small as a hyphen. Verify your registration name against your ID weeks before exam day.

Costs

GARP fees for a candidate registering at the early registration deadline:

| Fee | Amount |
|-----|--------|
| One-time enrollment | $400 |
| Part I exam | $600 |
| Part II exam | $600 |
| Total GARP fees | $1,600 |

Late registration adds approximately $200 to $300 per part. Study materials, prep courses, and practice questions are additional.

The FRM is cheaper than the CFA program total ($2,500 to $4,000) and the CPA path ($1,500 to $2,500), but study materials add significantly. Plan a total budget of $2,500 to $4,500 if you're using a paid prep provider.

FreeFellow's free FRM Part I question bank and free FRM Part II question bank cover the full GARP topic set at no cost. We also publish free practice exams generated from those banks.

Key Concept

GARP fees are about $1,600 across both parts. Total cost with materials runs $2,500 to $4,500 depending on whether you use paid prep providers or free alternatives.

FRM vs. CFA: A Brief Contrast

The FRM and CFA both signal expertise in finance, but they target different roles:

  • CFA: investment analysis, portfolio management, equity and fixed income research, asset management generally
  • FRM: risk measurement and management, bank and insurance risk roles, regulatory and capital management

Both credentials are respected. The choice depends on which side of the desk you want to sit on. If you want to pick stocks, build portfolios, or value companies, the CFA is the dominant choice. If you want to measure and manage risk, the FRM is more directly applicable.

For a deeper comparison, read FRM vs CFA: Which Credential.

Common Trap

Don't pursue the FRM if your career goal is investment analysis. The credential is widely respected but specifically focused on risk roles. The CFA is the better fit for asset management, equity research, and fixed income roles.

Career Paths and Salary

FRM holders work in three broad areas:

Bank Risk

Market risk analyst, credit risk analyst, model validation, liquidity risk, capital management. Banks and broker-dealers hire FRMs for first-line and second-line risk roles. Compensation typically ranges from $80,000 to $200,000+ depending on level, region, and bank tier.

Within bank risk, the most active hiring is in model risk management (validating the quantitative models that drive trading, lending, and capital decisions) and in counterparty credit risk (especially since post-2008 regulatory reform). FRM credentialing helps with both, because the curriculum directly covers VaR backtesting, model risk frameworks, CVA, and Basel rules.

Asset Management Risk

Portfolio risk analyst, hedge fund risk, alternatives risk. Asset managers and hedge funds hire FRMs to measure portfolio-level risk, perform stress tests, and oversee model risk. Compensation runs $90,000 to $250,000+.

Hedge funds in particular value FRMs for derivatives risk and counterparty exposure. Multi-strategy funds and credit-focused funds tend to hire more FRMs than equity-only managers, where the CFA is more common.

Regulatory and Consulting

Federal Reserve, OCC, FDIC, central banks, and the Big Four. Regulators hire FRMs for examination and supervisory work. Consulting firms hire FRMs for risk advisory engagements. Compensation depends heavily on role and region.

If your goal is a regulatory career, the FRM is one of the most directly aligned credentials available. Bank examiners, model-validation specialists, and stress-test reviewers all draw on the same curriculum content the FRM tests.

A Realistic Timeline

Most candidates need:

  • 300 to 400 hours for Part I (16 to 20 weeks at 18 to 25 hours per week)
  • 250 to 350 hours for Part II (12 to 16 weeks at 18 to 25 hours per week)

If you take the exams in consecutive cycles (Part I in May, Part II in November), the total study commitment is roughly 1 year.

You cannot register for Part II until you've passed Part I, but you can register for both in the same calendar year.

A common timeline mistake: scheduling Part II for the cycle immediately following Part I without a buffer. Score releases for FRM exams take 6 to 8 weeks. If you fail Part I, you may not learn until the Part II registration deadline has already passed for the next cycle. Build buffer time. I recommend 6 months between sittings, not 4.

Free Resources

  • FreeFellow FRM Part I Practice, 997 free questions across all four topic areas
  • FreeFellow FRM Part II Practice, 511 free questions across all six topic areas
  • GARP FRM Practice Exams, GARP issues 2 complimentary practice exams per part to candidates. These are the most representative free practice you'll find.
  • GARP Reading List, published in the FRM study guide each cycle. Some readings are free, others are part of the official curriculum.
Note

The 2 GARP-issued practice exams per part are the most representative practice available. Save them for the final 4 to 6 weeks before your sitting and treat them like real exams.

Final Word

The FRM is a focused credential for a specific career path. If risk management is what you want to do, it's the most direct signal you can earn. The 2-year experience requirement, the 4-hour test sessions, and the dual-part structure all front-load the work, but the credential is portable across banks, regulators, asset managers, and consulting.

Start preparing today with free FRM Part I practice questions on FreeFellow or free FRM Part II practice questions on FreeFellow.

GARP does not endorse, promote, review, or warrant the accuracy of the products or services offered by FreeFellow LLC. Global Association of Risk Professionals, GARP, FRM, and Financial Risk Manager are trademarks owned by the Global Association of Risk Professionals.